| |
|
HOW DOES THE CAR INDUSTRY
WORK IN SINGAPORE?
This section is meant to provide an easy to understand summary
of the local automotive industry from a retail perspective. The
information is categorised for new and pre-owned/used cars.
New Cars
There are 2 broad channels through which new cars are sold in Singapore:
| Manufacturer |
Manufacturers |
| Importers |
Exporters / Overseas Dealers |
| Distributors |
Importers |
| Retailers |
Retailers |
| Authorised Agents |
|
| |
|
(note: this excludes those who import their own
cars)
There are inherent differences between these 2 channels:
| Warranty program |
Supported strongly by the manufacturer. |
Warranties usually given by the retailer,
however, some manufacturers have warranties that are binding
regardless of which channel the car is sold through. |
| Product recalls |
In the event of a product recall, the authorised
channels are the first to know and are obligated to try and
contact owners of affected vehicles sold by them for rectification. |
While possible, it is highly unlikely that
the grey importers have well-tuned recall programs. |
| Stock levels |
The authorised dealers usually have healthy
stock levels and offer pretty decent delivery times. |
Grey importers usually carry limited stock
but can be resourceful in obtaining the vehicle you desire when
you whip out your cheque book. |
| Flexibility in options |
Many authorised dealers are too caught up
in their bread and butter of selling cars to try and customise
a car for you. This usually applies for the more affordable
cars. |
These dealers are often prepared to order
what you want provided you are prepared to wait. |
| After-sales support |
The authorised channels have manufacturer
trained technicians, official diagnostic equipment and regular
product training programs. |
Many grey dealers outsource their after-sales
function so it is best to check out what they offer from an
after-sales perspective. |
| Vehicle variety |
The authorised channels usually bring in
a fix variety of models and variants. |
The grey channels have no restrictions on
the variants they can import other than the guidelines imposed
by the authorities from a compliance perspective (eg, emissions,
safety, etc.) |
| Resaleability |
Compared with parallel imported vehicles
of the same model and specifications, those sold via the authorised
channel tend to fetch a slight premium in resale value compared
with the parallel imported one. |
However, some grey imports have higher
specifications and options that can improve their resale value. |
| |
|
|
Whether the official or grey channel is a better channel depends
on an individual buyer’s needs. At the end of the day, the
age-old adage Caveat Emptor (let the buyer beware!) applies regardless
of the chosen channel.
For a list of authorised car retailers, one can always refer to
the AA’s magazine “Highway” or their website at
www.aas.com.sg.
In addition, one can refer to the Singapore Motor Traders Association
website at www.smta.org.sg
for more information.
Pre-owned (Used) Cars
Buying a pre-owned car in Singapore can be a daunting experience.
The segment is highly fragmented with many small players and a handful
of larger players. While there are a couple of decent used car dealers
who offer a reasonable service, these are few and far between. As
in most other markets, the uninitiated enter a deal with a high
degree of uncertainty.
The perils of buying a pre-owned car in Singapore are similar to
those in other countries with certain added complexities. These
include factors that are peculiar to the Singapore market due to
either regulatory or cultural influences. A good example would be
the “paper value” concept whereby most cars have a certain
value which is “backed” by the authorities. This greatly
impacts the value of the vehicle, in some cases, even more than
the condition of the car itself.
We view the used car segment having 4 main product categories:
| “Nearly new” |
We draw the cut-off age for this category
at 3 years or earlier depending on when the vehicle’s
warranty expires. (Note: some brands of vehicles do offer a
five year warranty from date of registration). |
• The first owner has taken the brunt
of the depreciation.
• The vehicles generally have a warranty.
• These vehicles are generally in good condition. |
• With recent changes in regulations,
determining the base value of the car is critical for this category.
(see changes in PARF rebates below). |
| “Not-so new” |
In general, vehicles older than 3 years
but younger than 8 years fall into this category. Due to the
recent (between 2001 and 2004) high numbers of vehicles being
deregistered in Singapore, there are not that many vehicles
on the road that fall into this category. |
• The vehicles in this category tend
to have a higher paper value but this is a big generalisation.
It is best to check the vehicle’s papers to determine
the actual paper value. |
• Usually the warranty has expired
and the condition of the car may be a little more suspect especially
if a full service history is not available. |
| “Old” but less than 10 years
old |
These cars are generally between 8 and
10 years old and will need to have their COEs renewed at the
10th year if you wish to continue using the car. |
• These vehicles tend to have
very low depreciation because of their high paper values.
• The financial risk of owning one of these cars is
limited because of the short remaining lifespan and the predictable
rebate amounts.
|
• Here, maintenance costs might become
an issue due to the age of the car. However, if the vehicle
is properly evaluated, this risk can be mitigated to some degree. |
| “COE” cars (more than 10 years
old) |
Cars here have had their COEs renewed and
can be kept on the road until the current COE expires. Note,
most of these cars have had their COEs renewed for 10 years
but some for only 5. Those in the later group cannot have their
COEs renewed again once the 5 years are up. |
• These vehicles are the most affordable
generally because they have no PARF rebate.
• Low capital outlay is required and therefore, the amount
in value that can be lost is limited. |
• Maintenance issues and their corresponding
costs become more important.
• Increased road taxes (increasing by 10% per year for
5 years until the 15th year for a maximum of a 50% surcharge).
• Low paper/rebate levels. |
| |
|
|
|
For anyone who is considering buying a pre-owned car in Singapore,
we strongly recommend that you get the vehicle evaluated by a professional
evaluator like the AA. It is important to note that when vehicles
are advertised, many dealers use words like “STA or VICOM
certified/evaluated”. These evaluations are roadworthiness
checks (like the MOT in the UK) and do not constitute a thorough
vehicle evaluation.
Changes in PARF
rebate scheme
The value of a pre-owned car in Singapore contains a unique element
called the “paper value”. This value is a function of
the value of the un-used portion of the COE and something called
the PARF rebate. The PARF rebate is essentially based on the OMV
(Open Market Value) of the car and there have been some changes
in recent years to the rebate amounts. To date, there are 2 cut-off
dates for these changes and it is imperative that one checks the
registration card of a pre-owned vehicle for confirmation of the
relevant details.
This table (extracted from www.onemotoring.com.sg)
provides a summary on the PARF rebate levels depending on the cut-off
dates:
Not exceeding 5 |
130% of OMV |
75% of ARF paid |
Above 5 but
not exceeding 6 |
120% of OMV |
70% of ARF paid |
Above 6 but
not exceeding 7 |
110% of OMV |
65% of ARF paid |
Above 7 but
not exceeding 8 |
100% of OMV |
60% of ARF paid |
Above 8 but
not exceeding 9 |
90% of OMV |
55% of ARF paid |
Above 9 but
not exceeding 10 |
80% of OMV |
50% of ARF paid |
Above 10 |
0% of OMV |
0% of ARF paid |
| |
|
|
From the table, there appears to be only one cut-off date. However,
there is another cut-off date which is April
2004. If you look at the table carefully, the column which
says “Graduated PARF rebate” details PARF rebates based
on the OMV (Open Market Value or import value) of the car. The next
column details rebates based on a percentage of the ARF (Additional
Registration Fee) paid. In April 2004, the ARF payable for new cars
dropped from 130% to 110% so taking a car being deregistered at
the 10th year, the PARF rebate would have changed from 50% of 130%
(or 65%) to 50% of 110% (or 55%) of OMV. Future changes may apply.
 Back
to articles
|
|
